CITIC SEC: July electricity consumption growth weakens marginally; thermal power output continues to face pressure.

CITIC SEC released a research report stating that July's electricity consumption growth fell back to 1.7%. The slowdown in secondary industry growth, combined with a high base from last year's same period, led to a 5.1% year-on-year decline in residential electricity consumption, which was the core reason dragging down overall electricity consumption growth. Investment on the power source side continued to expand its year-on-year decline, but among the segmented power sources, thermal power still maintained a dense commissioning pace, with 11.94 million kW of newly added installed capacity in a single month; grid-side investment growth slowed to 0.7%. Overall weak electricity demand combined with improved clean energy output led to an 8.5% year-on-year decline in July thermal power utilization hours, the largest single-month decline of the year. Jiangsu's September monthly electricity price fell back to near the annual long-term contract price after six consecutive months of increases. Recommendations: leading hydropower, nuclear power, and coal-power integrated enterprises with high-quality underlying assets; H-share thermal power and H-share green power with safe valuations and attractive dividends; and new scenarios and new models such as virtual power plants and microgrids that benefit from digitalization and the increasing integration of the new power system. The main views of CITIC SEC are as follows: Demand: Secondary industry growth slowed & residential electricity consumption turned negative under a high base, and July's electricity consumption growth continued to fall back to 1.7%. According to CEC data (the same below), in July 2026, electricity consumption was 1,040.0 billion kWh, up 1.7% year on year, with growth down 2.0 ppts month on month from June. Electricity consumption growth in all industrial sectors slowed month on month, among which secondary industry electricity consumption growth fell 1.7 ppts month on month to 3.0%; under the high electricity consumption base brought by high temperatures in the same period last year, residential electricity consumption fell 5.1% year on year, dragging down overall electricity consumption growth; from the perspective of the contribution ratio to single-month electricity consumption growth, in July the contribution ratios of secondary industry/tertiary industry/residential electricity consumption to overall electricity consumption growth were 103.1%/57.6%/-59.2%, respectively. Within the secondary industry subsectors, July manufacturing electricity consumption rose 4.9% year on year, among which high-tech and equipment manufacturing electricity consumption rose 8.9% year on year, maintaining strong growth; the combined electricity consumption growth of the four major energy-intensive industries was 1.7%, with overall demand remaining stable. By region, July electricity consumption year-on-year growth in energy-intensive regions/coastal regions fell back to 2.0%/1.8%, respectively, and the divergence in electricity consumption growth across regions narrowed somewhat. Supply: Source-grid investment growth continued to fall month on month, and thermal power added 11.94 million kW of installed capacity in a single month. From January to July, domestic newly added installed capacity was 193.97 million kW, down 40% year on year. In July, newly commissioned thermal power installed capacity was 11.94 million kW, driving newly added installed capacity from January to July up to 50.30 million kW, with thermal power units maintaining a dense commissioning pace. In terms of industry investment, from January to July power source investment fell 4.7% year on year to RMB 423.7 billion, with the year-on-year decline continuing to expand compared with January to June; grid investment was RMB 334.0 billion, up 0.7% year on year, with growth continuing to slow, down 3.3 percentage points from January to June. Absorption: Weak demand & improved clean energy squeezed thermal power output. In July, the average utilization hours of national power generation equipment were 279 hours, down 7.3% year on year. By power source, hydropower single-month utilization hours rose 7.1% year on year to 422 hours, returning to growth; wind power utilization hours fell 6.3% year on year, with growth up 8.5 ppts month on month from June, possibly mainly benefiting from improved wind resources; under the squeeze from overall weak demand and improved clean energy output, thermal power utilization hours in July fell 8.5% year on year, the largest single-month year-on-year decline since 2026. On electricity prices, Guangdong's September electricity price continued to fall to RMB 0.403/kWh, a discount of RMB 50/MWh to the benchmark electricity price; Jiangsu's September electricity price fell month on month to RMB 0.345/kWh, returning to near the annual long-term contract electricity price level after six consecutive months of electricity price increases. Risk factors: Electricity demand falling short of expectations; market-traded electricity prices falling sharply; fuel costs rising sharply; wind and solar construction costs rising; new energy absorption risks intensifying; incoming water falling short of expectations, etc.